AIG secures $40bn of US Treasury support

by Gill Montia

Story link: AIG secures $40bn of US Treasury support

Stricken insurance company, American International Group (AIG), has called on the US Government for further help.

Last month the group warned that its $120 billion loan from the US Federal Reserve may not be enough to stabilise AIG’s finances as it undertakes a radical restructure and programme or disposals.

The company secured an $85 billion bail out in September, only hours after the collapse of investment bank Lehman Brothers, but had to return for a $37.8 billion top-up in early October.

Today AIG reported a third-quarter net loss of $24.5 billion and the US Treasury announced it would increase its stake in the group by purchasing $40 billion of preference shares.

This will effectively reduce the original $85 billion loan to $60 billion.

Further assistance has come from the US Treasury in the form of an interest rate cut on the debt and the establishment of vehicles that will buy mortgage-backed securities and other toxic debt from the insurer.